Mergers and acquisitions outlook

Inside

Desire to make larger deals is now visible — as expectations for deals greater than US$500m has increased sharply in the last six months.

These expectations, along with the increased deal volumes, are clear indicators that a more robust dealing environment is on the horizon. They signal companies have confidence in their capital structures, deal fundamentals and in a real sustainable economic recovery.

The anticipated narrowing of valuation gap can also be seen as a precursor to more deal-making. As companies begin to act on their intentions for deal-making and their imperative to grow, it will trigger deals of varying size across the global oil and gas marketplace.

Other trends we observe include:

Appetite for M&A increases

Deal volumes are expected to increase

Acquisition appetite increases as confidence improves

Market share objectives driving acquisitions

Bolt-on acquisitions favored over transformative deals

Pricing divergence reflects valuation uncertainty

Valuation gaps expected to widen

A cautious approach to emerging markets

Unforeseen liabilities as biggest threat to deal expectations

Divesting activity shifts down

Optimization moves to the forefront

Execution risks and business disruptions were the big deterrents to divestments

Q. Do you expect your company to pursue acquisitions in the next 12 months?

Oil and Gas Global Capital Confidence Barometer

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.